ING Direct 2015 Annual Report Download - page 11

Contents
Who we are
Report of the
Management
Board
Corporate
Governance
Consolidated
annual accounts
Parent company
annual accounts
Other
information
Additional
information
Report of the Management Board - continued
Risk costs declined 39.4 percent to EUR 433 million from EUR
714 million in 2014, both in residential mortgages and
business lending, supported by a recovery in the Dutch
economy.
Retail Belgium
Retail Belgium includes Record Bank and ING Luxembourg.
The underlying result before tax of Retail Belgium fell 11.1
percent to EUR 845 million in 2015 compared with EUR 951
million in 2014, mainly due to lower income and higher risk
costs.
Underlying income declined 2.7 percent to EUR 2,546 million,
from EUR 2,617 million in 2014. The interest result decreased
2.3 percent due to lower margins on lending products and
current accounts, which was only partly compensated by
higher volumes in most products. The net production in the
customer lending portfolio (excluding Bank Treasury) was EUR
1.7 billion, of which EUR 1.1 billion in mortgages and EUR 0.6
billion in other lending. Net customer deposits grew by EUR
3.0 billion. Operating expenses increased 0.5 percent to EUR
1,532 million, as higher regulatory expenses and some
additional restructuring costs were largely offset by a
decrease in staff expenses and a value-added tax refund. The
cost-savings programme announced by ING Belgium in early
2013, with the aim of realizing EUR 160 million cost savings by
the end of 2017, was successfully concluded by the end of
2015.
Risk costs increased by EUR 27 million to EUR 169 million, or
59 basis points of average risk-weighted assets. The increase
was mainly in business lending and consumer lending, while
risk costs for mortgages declined.
Challengers and Growth Markets
Retail Germany
Retail Germany includes ING-DiBa Germany, ING-DiBa Austria
and Interhyp.
Retail Germany’s underlying result before tax increased 31.3
percent to EUR 1,012 million compared with EUR 771 million in
2014, driven by strong income growth.
Underlying income rose 18.3 percent to EUR 1,910 million.
This increase mainly reflects higher interest results following
continued business growth and improved margins on savings.
Margins on lending and current accounts were somewhat
lower. Net inflow in customer deposits (excluding Bank
Treasury) was EUR 6.4 billion in 2015. The net production in
customer lending (excluding Bank Treasury and movement in
the mortgage hedge) was EUR 2.5 billion, of which EUR 1.6
billion was in mortgages and EUR 0.9 billion in consumer
lending. Investment and other income was EUR 104 million,
compared with a loss of EUR 27 million in 2014, mainly due to
higher realised gains on the sale of bonds and a positive swing
in hedge ineffectiveness results.
Operating expenses increased 8.9 percent compared with
2014 to EUR 842 million. The increase mainly reflects higher
regulatory costs, an increase in headcount at both ING-DiBa
and Interhyp, as well as investments to support business
growth and attract primary banking customers. The
cost/income ratio improved to 44.1 percent from 47.8 percent
in 2014.
The net addition to loan loss provisions declined to EUR 57
million, or 23 basis points of average risk-weighted assets,
from EUR 72 million, or 29 basis points, in 2014, reflecting
better performance in the German mortgage book.
Retail Other
Retail Other’s underlying result before tax decreased to EUR
577 million, from EUR 690 million in 2014. The decline was
primarily attributable to lower income in Italy due to EUR 97
million of non-recurring charges related to increased
prepayments and renegotiations of fixed-term mortgages,
and a EUR 31 million one-off charge in regulatory expenses
related to the bankruptcy of SK Bank in Poland. Excluding both
items, the result before tax increased by 2.2 percent.
Total underlying income rose by EUR 33 million, or 1.4
percent, to EUR 2,369 million. This increase is attributable to
higher interest results stemming from higher volumes in most
countries, partly offset by the aforementioned non-recurring
charges in Italy. The net inflow of customer deposits, adjusted
for currency effects and Bank Treasury, was EUR 8.0 billion,
with growth mainly in Spain, Poland, Turkey and Romania. Net
customer lending (also adjusted for the sale of mortgage
portfolios in Australia) rose by EUR 7.8 billion, mainly due to
growth in Australia, Poland and Spain.
Operating expenses increased by EUR 101 million, or 6.8
percent, versus 2014, largely as a result of higher regulatory
costs (including the one-off charge in Poland), investments to
support business growth in most of the business units and
inflation adjustments in the Growth Markets.
The addition to the provision for loan losses was EUR 210
million, or 45 basis points of average risk-weighted assets, up
from EUR 165 million, or 40 basis points, in 2014. The increase
was mainly visible in Turkey and Poland.
Conclusion
Retail Banking performed well in 2015, delivering strong
results in a challenging economic environment. We welcomed
more new customers, and empowered retail customers and
small businesses by lending more. In addition to the many
awards won by our Retail Banking businesses across the
world, we were ranked number one for customer satisfaction
(as measured by the Net Promoter Score) in seven of our
markets.
ING Bank Annual Report 2015 9